Is Now the Time to Invest in Japan?

by Eric Hammer | FTMDaily Contributing Writer

TEL AVIV, Mar 15 – In the aftermath of a massive disaster such as the one that is currently unfolding in Japan, it’s hard to see past the immediate situation. After all, how can we really be asking about investment in Japan when the island nation is seeing devastation on a scale not seen since the end of World War II?

On the other hand, as horrific as the scenes are now, the Japanese people will recover from this disaster and the question still faces our readers – should we be standing still, dumping shares or jumping head first into the Nikkei? After all, even in the midst of the disaster, the Japanese stock market is still working and people are still buying and selling securities.

Even before the earthquake hit, the Japanese economy was on the skids, with massive amounts of national debt. That debt however was and still is largely financed by Japanese consumers who invested their savings into government bonds. The problem with the debt is that as the Japanese people age, they are increasingly looking to cash out to help pay for their retirement.

Given the recent disaster which struck the island nation, the Japanese government can be expected to print more money and to continue to borrow in an effort to rebuild. Ultimately, this means lots of new jobs and a potential growth spurt in the medium term for the Japanese economy.

The question however is about the short term situation. In the short term, it seems that Japanese stocks may continue to tumble even though a number of analysts are recommending a wait and see approach to the latest crisis.

A great deal also depends on the unfolding nuclear crisis. If the Japanese suffer a full melt down, it could put a further damper on the Japanese economy for the time being. On the other hand, if they are able to pull through and shut down the reactor safely, then it could provide a psychological boost for the Japanese economy.

One thing that is telling however is the reaction that the Japanese people have had to the disaster so far. While they are obviously scared and in shock, we have not seen the kind of disruption and chaos that typically follows such a disaster in other parts of the world. Instead, the Japanese people seem to be coming together and working as rapidly as possible to rebuild and to recreate the orderly society that they are so well known for.

This bodes well for the long term prospects in Japan since it shows that the country will rebuild quickly and their larger stocks should rebound nicely from the disaster, even if certain companies have suffered some setbacks for the time being.

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